5 Tips For Keeping Your Burn Rate Under Control


Minyang Jiang

For small and medium-sized businesses, keeping an eye on their burn rate is essential to balancing company goals with financial realities. The burn rate, which simply refers to the amount of money you’re losing versus the amount of money you’re taking in, is a key metric for determining whether your business is overspending and will need further investment. This metric is especially important early in a business’s life, when hiring, marketing, research and development quickly eat into your cash stockpile.

If you want to realize success, you need to keep your burn rate under control. Think about implementing the following tips to keep your business humming along no matter what happens.

Always Assume You’re Short on Cash

Business owners should approach their business decisions with a strict budget in mind. While it’s necessary to make investments in your business, spend on advertising and hire the right people, it’s also smart to do this in the most cost-effective way possible. Build sound financial estimates about how much money you’ll need to fulfill your business objectives, and then pretend you have only half that money on hand. This can do wonders for controlling the burn rate.

Pay Staff Partially With Equity

Often, it’s a good idea to run small and medium-sized businesses like startups, which often pay employees partly through equity. By paying with equity, you can save on salary costs and enable employees to become more invested in your company. Just be sure not to overly dilute your company’s value with too many stock options.

Secure Right-Sized Funding

Being an entrepreneur often means securing the money you need to realize your vision. If you’re losing money faster than you’re taking it in, there will come a point when you need to secure more funding. Online lending is increasingly proving to be a reliable, low-cost option for businesses that need access to working capital quickly.

Online funding often features simplified applications that can be completed in minutes, and approval and underwriting decisions within hours, rather than the weeks or months it might take to secure the same results from a traditional bank.

Leverage the Talent of Interns

Interns are often driven, knowledgeable and dedicated to a company. They also happen to be great resources for small businesses and startups, especially when burn rate is an issue. You may decide to take on paid or unpaid interns, but it’s important to actively engage them and nurture their skills. After all, interns have the potential to turn into valuable hires.

Outsource What You Can

Outsourcing can be a challenge and won’t work for every business. However, you can often achieve significant cost savings by outsourcing at least some elements of your operations. Payroll, Web design, information technology and even bookkeeping are areas that you should consider outsourcing, at least temporarily.

With these tips in mind, you should be in a better position to control your burn rate and secure the funding needed to keep your business going strong.